Sterling tumbled to its lowest in more than a year against the dollar and weakened against the euro on fears that the UK economy is sliding into recession.

The pound, which a matter of weeks ago had been trading above the $2 mark, dropped sharply overnight in Asia to below $1.93 after the Bank of England’s decision to keep rates at 5pc prompted more traders to expect that the Bank will eventually cut rates.

With house prices sliding and consumers deserting the high street, an increasing number of currency analysts now expect sterling to fall to $1.90 and 80p against the euro by the end of the year.

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City economists are also coming round to the view that the MPC’s next move in interest rates will be down.

“The dollar is strenghening across the board, but it’s by default because we’re getting downside surprises on the economy in the UK and Europe,” said Hans Redeker of BNP Paribas.

“Britons have had the cash machines in their gardens taken away and we’ve got a consumer-led slowdown,”